How to Save for a Home Down Payment

Save for a Home If you are planning to buy a home, you know it takes a lot of money.  However, it takes a lot of planning as well.  Here are some things to consider when saving money for a home, and what you need to do to get your finances in order so that you can afford a home.

What To Do Early On

Before even getting close to looking for a home, there are a lot of things you need to do early on.  In terms of timing, I’m talking at least a year away from buying a home, if not longer.  And the biggest thing you need to keep in mind is your credit score and credit history.  Some companies, such as MBNA, even offer services such as low fixed rate plans for life and payment protection plans that will ensure your credit is not damaged if you lose your job. For most people, buying a home means getting a mortgage, which means you have to have excellent credit.

To make sure you have excellent credit, you should pull your credit report and see what, if anything, needs to be addressed.  Then, you can focus on what you need to do to repair your credit.  This usually means paying down debt, making sure there are no late payments, and building a solid history.  A great strategy to pay down debt faster is by employing a balance transfer to a zero interest account and applying the interest savings to the outstanding balance. This will be the key to getting the home you want.

Where to Find Savings

Once you’ve started working on your credit, you need to make sure you save money.  For a conventional loan, you will need to have at least 20% down, but even VA or FHA loans require at least 3% down.  This can be a sizeable amount depending on the purchase price, and you need to find that money.

To find savings, look at your budget and see where you can trim to get some additional money.  You can also look at downsizing your current housing situation to save money and put that in a house fund.  For example, you can get a smaller apartment, and save $200 per month.

Where to Keep Your House Fund

It is important to keep your house fund safe, since you will need that money in the next year or so.   This means keeping it in an FDIC insured savings account so that there is no chance you can lose principal. MBNA offers competitive interest rates that will help your house fund grow quickly.  Make sure that you watch your balance and not exceed FDIC limits so that you can be sure your house savings will be safe.

Stay Connected with The Frugal Toad

Subscribe to our e-mail newsletter to receive updates.

, ,